Project #16832 - Week 4 - Case Study

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Case Study

You are the CFO of Megatron Industries. You have $53.9 million in LTD, $7.7 in preferred stock and $15.4 million in common equity. The weights for the current capital structure are 70% debt, 10% preferred, 20% common equity. You are considering a major project which would add $23 million to the capital structure:

Structure A: $70 million LTD, $10 million preferred, $20 million common

Structure B: $53.9 million LTD, $7.7 million preferred, $38.4 million common

Structure C: $ 53.9 million LTD, $ $30.7 million preferred, $15.4 million common